A topic that gets people talking from time to time is the concept of "free flies".  This is short for a position known as a risk free butterfly.  How can you have a risk free position?  The answer is, you can't.  You must "leg in" to the position typically via veritcal spreads.  For example, the XLF is trading at 22.  I have a slightly bullish feeling on XLF for the very short term, so I open a put credit spread, short the 22 strike and long the 21.  To complete a butterfly, you need to have two short options (body) 1 long option to the right and left of the shorts (the wings).  So in my example, I'd need to open a put debit spread where I'm short the 22 strike and long the 23.  What has to happen to complete the "free fly" is that the position must move in my direction to where the credit I received on the credit spread, let's say .20, is equal to the debit paid for the debit spread.  So today, my credit is .20, but the cost of the debit spread is .30.  So now the cost of the debit spread must lower to .20 to get a free fly.  This can only happen if the underlying moves in my favor.  Until then, my .20 credit has an .80 risk, hardly risk free.

I think these are coming up more and more recently becuase of the wild gyrations which is likely causing more and more of these types of positions to be completed successfully.  The market has been down 300 points in just the last couple of days.  What a great time for me to consider filling the first part of my free fly and waiting for a couple of days for the market to bounce up 300 points and completing the butterfly.  However, what if the market tumbles 500 points never to return by expiration?  You're on the hook for the .80 risk.

The point I'm trying to make is that there is no such thing as risk free.  There are no secrets.  If something looks risk free to you, then you don't understand it and please do not learn the hard way.

Am I saying that free flies are bad?  Nope.  Just like any other position, they have their place in the world.  They may be for you, they may not be.  That's for you to decide.  I may put on a couple of free fly attempts in the coming days and weeks to capitalize on the movements to nowhere.  The market could tank, and then I'll be left holding the bag.